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Your retirement spending guidelines

You will face uncertainty over how much you can afford to spend in retirement. Factors such as market variability, inflation and taxes only add to the uncertainty.

Here is a six-step plan to help put your retirement spending concerns to rest by determining your retirement income longevity.

Step 1 – Prepare a personal profile: The level and frequency of income you will need (or the withdrawal rate from your investments held within Registered Retirement Savings Plans and other income-producing investments) depends on a number of factors:

  • Your investment profile
  • Your years in retirement
  • Your income requirements

Step 2 – Know your income from other sources: Your retirement income will derive from sources other than your personal retirement savings. Those sources include Canada Pension Plan/Québec Pension Plan (CPP/QPP), Old Age Security (OAS) and company pension plans.

Step 3 – Know your expenses: Add up your expected expenses, both essential and discretionary.

Step 4 – Bridge the gap: Calculate the gap between your income from all sources outside your personal retirement savings and your expenses.

Step 5 – Assess your withdrawal requirements: Determine the amount you need to withdraw from your personal retirement savings and investments to bridge the gap between your income from other sources and your expenses.

Step 6 – Make adjustments: If your expected withdrawal rate is not sustainable based on the projected returns from your current savings and investments, you will need to re-evaluate your portfolio or adjust your lifestyle goals.

Work with your professional advisor to develop a personal plan that takes into account all of these factors and provides peace of mind. Very often, a high net worth individual will discover that they can afford to spend much more than they thought.

Date reviewed: October 6, 2014

This column, written and published by Investors Group Financial Services Inc. (in Quebec – a Financial Services Firm), presents general information only and is not a solicitation to buy or sell any investments. Contact a financial advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant.